TMI Blog2020 (5) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... erogative of the CoC in not considering the resolution plan submitted by M/s. Orion Ferro Alloys P. Ltd., and Mr. Madhusudhan Raju Chintalapati cannot be evaluated by the Authority. The commercial wisdom of the CoC in accepting a resolution plan needs to be respected by the Adjudicating Authority - Having said that it would not be out of place mention here that the Adjudicating Authority can evaluate a resolution plan if it conformed to terms of section 30(2) of the Code. As already indicated the resolution plan approved by the CoC does not meet the requirements of section 30(2) of the Code. The same therefore, could not be accepted. Its non-acceptance however would not automatically render the plan submitted by M/s. Orion Ferro Alloys P. Ltd., acceptable. Application dismissed. - I. A. Nos. 64, 66, 67, 68 of 2020 in T. C. P. (IB) No. 41 / 9 /AMR/ 2019 and C. P. (IB) No. 423 / 9 /HDB/ 2018 - - - Dated:- 26-5-2020 - JANAB MOHAMMED AJMAL (Judicial Member) V. Suryanarayana with Ms. B. Aparna for the applicant in I. A. No. 64 of 2020 and for respondent No. 1 in I. A. Nos. 66, 67 and 68 of 2020. Sanjay Kumar Sharda, Practising Chartered Accountant for the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the even date in I. A. No. 23 of 2020. 4. The resolution professional on November 8, 2019 invited expression of interest (EoI) afresh as per the resolution dated November 6, 2019 adopted in the 14th meeting of the CoC. In response thereto the aforesaid two applicants submitted their EoI. The committee of creditors (CoC) however, authorised the resolution professional to negotiate with the prospective resolution applicants to improve upon their plans. No better resolution plans were however, submitted. Meanwhile on October 25, 2019 one of the resolution applicants Mr. Madhusudhan entered into an agreement with Vijay Kumar Penmetsa (former managing director of the corporate debtor) whereunder the former agreed to invest substantial amount detailed therein. Under the restructured shareholding pattern, he (Madhusudhan) would have 50 per cent. shareholding and P. Vijay Kumar would have 30.81 per cent. shareholding with four others as minor shareholders. The duo, on January 27, 2020 field I. A. No. 15 of 2020 seeking direction to the resolution professional to place the restructuring plan submitted by Mr. Madhusudhan before the CoC for consideration. This Tribunal by an order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alloys P. Ltd., one of the resolution applicants, filed I. A. No. 66 of 2020 by e-mail dated May 1, 2020 praying to hear it before any orders in I. A. No. 64 of 2020 could be passed. It challenged the decision of the CoC on various grounds detailed in the petition. 7. Mr. Madhusudhan Raju Chintalapati on May 11, 2020 filed I. A. No. 67 of 2020 praying to implead him as a party in I. A. No. 64 of 2020 and accord him an opportunity of being heard before orders therein could be passed. The same day he also filed I. A. No. 68 of 2020 for making necessary modification to the resolution plan (restructuring plan) necessitated by the dramatic change in the economic scenario, market dynamics and availability of manpower resulting from Covid-19. He accordingly prayed to stay adjudication of I. A. No. 64 of 2020 and grant him sufficient time for making necessary modifications to the resolution plan submitted by him. 8. The IAs were heard together since the prayers made in I. A. Nos. 66 and 68 of 2020, if allowed, could impact the decision in I. A. No. 64 of 2020. All the IAs thus shall abide by the orders passed herein. 9. The corporate debtor while being managed by P. Vijay Kumar fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roves the resolution plan, the moratorium order passed by the authority under section 14 shall cease to have effect. The scheme of the Code, therefore, is to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate body is able to pay back its debts and get back on its feet. 10. Further in Swiss Ribbons P. Ltd. v. Union of India [2019] 213 Comp Cas 198 (SC) ; [2019] 4 SCC 17, the hon'ble court observed (page 235 of 213 Comp Cas) : As is discernible, the preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximization of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends. 11. The aforesaid would indicate that the erstwhile management ought not to have any role in the forward continuance of the corporate debtor. Section 29A is also a step in that direction. Any former promoter(s) cannot have any involvement in the new management of the corporate debtor. The resolution professional received two resolution plans in response to his advertisement dated November 8, 2019. The CoC authorised the RP to negotiate with the applicants to improve upon the offers made by them. The outcome of such negotiation, if any, with them is not known nor has been brought to the notice of the CoC. This Authority in its order dated October 31, 2019 observed that no development (with regard to the CIRP) has been brought to the notice of the Authority during the extended period. No headway has apparently been achieved in negotiating with the perspective resolution applicants till January 27, 2020. Meanwhile the former managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Vijay Penmetsa group 1,19,21,695 30.81 3. Ch. Ramaseetha group 18,38,000 4.75 4. P. V. Sujatha 33,93,400 8.77 5. P. N. Raju group 3,80,000 0.98 6. Others 18,11,564 4.68 Total shares 3,86,89,318 100.00 13. I. A. No. 15 of 2020 was placed before Special Bench on February 4, 2020 which passed the following order : Counsel for the applicant and counsel for the RP/CoC present. I. A. No. 15 of 2020 filed by Mr. P. Vijay Kumar, exmanaging director of the corporate debtor and one Mr. Madhusudhan Raju Chintalapati, new investor praying as follows : 'Direct the resolution professional of the corporate debtor to place the restructuring plan before the CoC to consider/evaluate the restructure proposal as per law as submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibition or restrictions to participate in the resolution or liquidation process, and gain or regain control of the corporate debtor. This may undermine the processes laid down in the Code as the unscrupulous person would be seen to be rewarded at the expense of creditors. In addition, in order to check that the undesirable persons who may have submitted their resolution plans in the absence of such a provision, responsibility is also being entrusted on the committee of creditors to give a reasonable period to repay overdue amounts and become eligible. (emphasis supplied) Parliament was evidently concerned over the fact that persons whose misconduct has contributed to defaults on the part of bidder companies misuse the absence of a bar on their participation in the resolution process to gain an entry. Parliament was of the view that to allow such persons to participate in the resolution process would undermine the salutary object and purpose of the Act. It was in this background that section 29A has now specified a list of persons who are not eligible to be resolution applicants. 15. Referring to the same the hon'ble court cautioned in the following words (page 637 of 210 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2020] 219 Comp Cas 97 (SC) (Civil Appeal No. 8766-67 of 2019 decided on November 15, 2019). Therefore, the non-acceptance of the plan submitted by M/s. Orion Ferro Alloys P. Ltd. (applicant in I. A. No. 66 of 2020) cannot be gone into by the Adjudicating Authority. Having said that it would not be out of place mention here that the Adjudicating Authority can evaluate a resolution plan if it conformed to terms of section 30(2) of the Code. As already indicated the resolution plan approved by the CoC does not meet the requirements of section 30(2) of the Code. The same therefore, could not be accepted. Its non-acceptance however would not automatically render the plan submitted by M/s. Orion Ferro Alloys P. Ltd., acceptable. Therefore, the applicant in I. A. No. 66 of 2020 would not get any relief from this authority. Hence ordered. ORDER The applications in I. A. No. 64 of 2020, I. A. No. 66 of 2020, I. A. No. 67 of 2020 and I. A. No. 68 of 2020 are rejected on contest. The resolution plan submitted in I. A. No. 64 of 2020 is rejected under section 31(2) of the Code. Prayers made in I. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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